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From market failure to government failure

From market failure to government failure

Flowchart showing government intervention leading through information failure, administrative and compliance costs, incentive distortions, unintended consequences, and regulatory capture to net welfare loss for consumers, producers, taxpayers, and third parties

Government failure happens when intervention creates a net welfare loss, so social costs exceed social benefits. This is different from market failure, where the free market itself allocates resources inefficiently.

1.8.10 Government failure Lesson

  1. A Level
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